Wealth is up, but more than 400,000 Sydneysiders are 'over-indebted'

Soaring house prices have lifted the wealth of the average Sydney household to $1.3 million, but hundreds of thousands of families in the city have been left "over-indebted".

The Bureau of Statistics' latest survey of income and wealth has classified 407,000 Sydney households with property loans as over-indebted, meaning they owe at least three times more than they earn in year. The typical over-indebted household in Sydney is carrying a hefty $765,400 in total property debt.

"Growth in debt has outpaced income and asset growth since 2003-04," the bureau said. "Rising property values, low interest rates and a growing appetite for larger debts have all contributed to increased over-indebtedness."

Over-indebted households are more vulnerable to economic shocks, such as rising interest rates, the loss of a job or a drop in asset prices.

The bureau estimates an additional one percentage point interest rate rise would cost over-indebted Sydney households an average of $139 a week more in mortgage repayments.

Sydney's property boom has helped boost average household wealth in the city from $971,700 in 2013-14 to $1.3 million in 2015-16 - an increase of $328,000.

The figures underscored a yawning wealth gap between Sydney and most other parts of Australia. Household wealth in Greater Sydney was $408,000 more than the national average, $575,000 higher than in the rest of NSW and $805,000 more than in regional Tasmania.

Nationally, average household debt has almost doubled since 2003-04.

High income earners were more likely to hold debt, with 89 per cent of the wealthiest fifth of households holding debt, compared with half of those in the lowest income quintile.

Younger property owners in particular have taken on greater debt. Three in five households (62 per cent) headed by a 25-34-year-old, and one in two (51 per cent) of 35-44-year-old households who held a property loan were over-indebted.

Over-indebted households were three times more likely to hold investment loans than other households.

There was also a disproportionate share of over-indebted households in Sydney and Melbourne - those two cities made up 43 per cent of over-indebted households while accounting for only 38 per cent of all households. But over-indebted Sydney households owed $269,000 more on average than their Melbourne counterparts.

Separate household expenditure data showed Sydneysiders typically spend $3070 per year more on housing than the national average.

Australia's average household net worth reached $892,000 in 2015-16.

The wealthiest 20 per cent of households had average net worth of $2.9 million and together held more than 60 per cent of all household wealth. The lowest 20 per cent controlled less than 1 per cent of all household wealth, with average wealth of $36,500 in 2015-16.

The capital cities with the lowest average household net worth were Adelaide ($666,200) and Hobart ($638,500).